13/10/2020 VDTK 10.75p £33m

© SEAL Advisors 2020. This document is corporate marketing material and is not independent research. This is not a financial promotion (please see disclaimer)

VDTK 10.75p £33m

The Elevator PitchLight, durable and potential for significant growth

❖ Verditek’s core lightweight solar PV business is positioned in an attractive secular

growth market with strong regulatory and technological drivers

❖ Recent management changes have resulted in the company focusing on sales

execution and moving the business into the initial phase of commercialisation

❖ With first orders for its solar PV modules already in place, the company should report

its first revenues later this year

❖ Recent contract wins in the oil & gas and mining sectors will act as reference contracts

for future wins in the off-grid solar market

❖ In addition to energy and mining, significant opportunities exist for Verditek’s light-

weight and durable solar PV product in the marine, telecoms, residential housing,

commercial real estate and transport sectors

❖ From its plant in Italy, the company has sufficient manufacturing capacity to produce

up to 60 MW per year of solar modules (based on triple shift production)

❖ The Paragraf joint development program (JDP) to produce a graphene-integrated solar

PV cell provides a source of substantial optionality within their solar business

The Tick List

Summarised revenue scenario for Verditek Solar (SEAL estimates)*

SEAL Advisors Research & Strategy

Total solar market (IRENA ests.)

Niche player operating within a sector with a very large addressable market ✓

Competes on product and specific applications rather than price ✓

Core product (solar PV modules) IEC certified for international use ✓

Manufacturing facilities fully operational with limited impact from Covid-19 ✓

A shift in focus from technology development to commercialisation ✓

Addressable markets (SEAL ests.)Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Capacity (MW) 60 60 60 160 160 160

Capacity utilisation 5% 25% 65% 39% 51% 67%

Volume sold (MW) 3 15 39 62 82 107

Price/MW (£m) 1.12 1.04 0.97 0.90 0.84 0.78

Revenue (£m) 3 16 38 56 69 83

13/10/2020

Key stats.

Sector: Alt. Energy

Listing: LSE – AIM

Head Quarters: London/UK

Country of inc: England & Wales

ISIN: GB00BF2C0424

Admission date: 10th August 2017

Governance code: QCA

498

2640

3,559 3,000

Housing(Resi &

Modular)

Energy &Mining

TelcoTowers

EV carports

Off Grid Transport

Light weight solar (MW pa)

39 480

2840

8519

2010 2018 2030E 2050E

Installed capacity (GW)

1

*See page 13 for details of the derivation of the estimates

https://twitter.com/VerditekPLC

https://www.linkedin.com/company/verditek

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https://verditek.com/news-and-views/videos

https://vimeo.com/377544822

https://verditek.com/


Key data

SWOT Analysis

STRENGTHS

• Operating in a highly attractive secular growth area

• Competing on product rather than price in core solar market

• Multiple applications for light weight solar PV technology

• Unique GIPV solar cell-technology is a potential game-changer

OPPORTUNITIES

• Telco towers and rural micro-grids represent a sizeable opportunity

• Capitalise on recent order wins in the marine market

• Additional manufacturing capabilities closer to some markets (e.g. Asia)

• Commercialisation of GIPV technology via royalty agreements with OEMs

WEAKNESSES

• Further significant order wins required to achieve critical mass in revenues

• Low manufacturing capacity utilisation and centred at only one facility

• Cost disadvantage relative to large global solar OEMs

• Loss-making and yet to reach free-cashflow break-even

THREATS

• Lack of orders in solar would extend time to free cash-flow break even

• Single manufacturing facility increases production risk in event of shut-down

• GIPV technology may prove difficult to commercialise and/or royalty agreements may prove elusive

SWOT

SEAL AdvisorsResearch & Strategy

About Verditek

Verditek is a clean technology company primarily focused on the solar power sector, with

interests in bio-filtration and carbon capture. At IPO, Verditek comprised a 51% stake in

Greenflex Energy, which in turn owned 100% of Verditek Solar Italy, a manufacturer of

lightweight solar PV; a 23.6% stake in Westec Environmental Sols LLC (WES), a patented

absorption technology that optimises mass transfer of gas and liquid with applications in

industrial emissions control and carbon capture; and a 51% stake in BBR Filtration, a

licensed bio-filtration de-odourisation. Verditek has subsequently taken full control of the

Italian solar PV manufacturer, with Greenflex Energy becoming Verditek Solar (Italy). In

October 2018 WES was acquired by the Canadian company, ICSI, with the result that

Verditek’s stake in WES became a 22.2% stake in ICSI. Verditek has also entered into a

Joint Development Programme (JDP) with Paragraf, a Cambridge-based company focusing

on the disruptive potential of graphene, with the aim of developing a graphene-

integrated solar PV cell. In June 2019 this aim was achieved, with the Paragraf JDP

announcing that it had created the world’s first graphene integrated PV cell. Following

this achievement, Verditek and Paragraf signed a second JDP with the aim of

commercialising the technology. In May 2020 Rob Richards was appointed CEO of

Verditek, which arguably marked a turning point in the company as it moved from

development to commercialisation of its core solar business.

Carbon Capture

Bio-filtration

Solar

Verditek - Group investments and stages of commercialisation

Development Production Commercialisation

-1.81 -1.91

-1.59

2017 2018 2019

EBITDA £m

-1.98

-2.66

-1.86

2017 2018 2019

PBT £m

-1.09

0.53 0.56

2017 2018 2019

Net Debt/(cash) £m

100%

51%

22%

Solar(Verditek

Solar Italy)

Bio-Filtration(BBR)

CarbonCapture*

Ownership by Verditek plc

*Financial investment in ICSI (formerly WES)

2


❖ Corporate Strategy and near-term drivers

Verditek aims to capitalise on its innovative light-weight solar PV technology by targeting

niche applications within the broader solar power market. By bonding solar PV cells to a

polymer sheet instead of glass that is used in the creation of polycrystalline solar PV

modules, Verditek’s modules are around one tenth the weight of conventional PV

modules. This makes them particularly suited for a range of niche applications where

conventional solar PV modules cannot be used. An associated benefit of bonding to

polymer rather than glass is that it makes the panels durable, further increasing the range

of applications.

A key area for Verditek’s solar products is the off-grid solar market. This is typically where

there is no electric grid, or where the cost of connecting to the grid is too high to be

economically viable (e.g. remote base camps for the extractive industries of oil & gas and

mining). The virtue of this market is that relatively small project sizes (<10 MW) and

weight restrictions means it is unsuited to the heavier conventional PV panels mass-

produced by the large global solar PV OEMs. Hence, the off-grid solar market tends to be

less subject to the pricing pressure, a feature of the conventional solar market. Verditek

estimates that the payback period for a typical customer in the off-grid sector is 2 years.

The combination of the new CEO’s experience of working with the oil & gas and mining

sectors and the need for companies in these sectors to reduce costs and carbon foot-print

provides an excellent opportunity for Verditek to exploit this niche. Initial orders already

secured in both the oil & gas and mining verticals (SAF in Pakistan and Black Tulip Mining

in Peru) should serve as reference contracts for further orders in these markets. Other

areas of focus in the off-grid segment range from remotely-sited telecom towers to rural

micro-grids. This latter market has seen a ten-fold increase in volumes between 2010-

2018. Interestingly, part of the recent SAF follow-on order is destined for a rural micro-

grid in Pakistan, giving Verditek an in-road into this sizeable and fast-growing niche.

Agriculture is another niche opportunity within off-grid solar, with Verditek’s products

suited to low-load bearing agricultural buildings located far away from the grid.

Other addressable new markets include the electric vehicle (EV) charging infrastructure

market and modular residential construction sector, both of which have the potential for

strong growth. Verditek’s estimates that its serviceable addressable market (SAM) to be

c5% of the 100 GW per year of total solar installations, equivalent to £5bn per year.


❖ Strategy simplified

Secure further solar orders

Increase capacity utilisation

Achieve critical mass in solar

revenues

Attain free cashflow

breakeven

Commercialise GIPV and secure

royalty agreements

Crystalise value in carbon capture

and bio filtration

❖ Longer-term drivers

The optionality around graphene-integrated photovoltaic cells (GIPV) and the JDP with

Paragraf is significant. Here, the aim is to licence the technology to consumer electronics

OEMs for incorporation in their own products in return for an ongoing royalty fee. Mobile

device OEMs (handsets/tablets/laptops) are the key target group. It is envisaged that a

GIPV-enabled device would be able to trickle-charge whilst in use, significantly extending

battery life. Longer-term, Verditek’s equity interest in the Bio-Filtration and Carbon

Capture technology businesses could also represent a source of value.

Verditek’s modules are significantly lighter and more

durable than conventional PV

modules

A key area for near term growth is the

off-grid solar market utilised by the oil &

gas and mining sectors

Contracts already secured with SAF and Black Tulip

Minerals

Significant opportunities in

graphene. Sources of value in carbon

capture and filtration

Verditek’sserviceable

addressable market estimated at c£5bn

per year

3


ESG credentials

❖ Environmental

The company’s products enable reductions in carbon foot-print by providing customers

with flexible sources of solar renewable electricity. However, from an ESG perspective the

focus needs to be on the company’s operating performance and its contributions to the

environment from its production activities. Solar panels can be energy intensive to

manufacture as they require heat to bake the substrates and electric power to laminate.

Verditek has one manufacturing plant in Italy and operates on 100% renewably sourced

electricity. They currently do not disclose their total carbon foot-print in relation to

output because the company has been in start-up phase and the factory has been

operating at a low utilisation rate. The company has indicated that disclosure of its carbon

footprint will be disclosed in the future. One cause for slight concern is the air freighting

of components from Taiwan to Italy. Establishing a manufacturing site closer to its Asian

suppliers would help mitigate this risk.

❖ Social

The company is in start-up mode, and while there is some diversity in the workforce of

seven, the board has no female or BAME members. Verditek’s products are certified for

safety and sold through distributors to business customers seeking strict specifications.

There are no plans to sell directly to consumers. There are currently no issues with

community relations and neither the company’s operations nor the products’ usage

create any human rights risks.

❖ Governance

The company reports against the Quoted Companies Alliance (QCA) Corporate

Governance Code. It seeks to engage positively, responsibly and fairly with all of its

stakeholders. The Company has been through several iterations of its senior

management team as its strategy has evolved over the last few years. The CEO has only

been in place since May 2020 but has significant commercial experience of the target

customer base. The board includes major shareholders but would benefit from a more

diverse non-executive presence. Systemic risk factors are addressed in the company’s

annual report but while they are not highly threatening, control processes (as disclosed)

cannot be considered robust.

❖ Summary and conclusions

Verditek has a small environmental footprint (though this is a baseline study) and has a

few steps to make on formulating and disclosing better policies in some areas of social

impact. A more diverse Board would help, but there are no meaningful risks that are not

being managed from an ESG perspective at the company’s current stage of development.


ESG Key Performance Indicators

KPI

GHG emissions n/a

Total no. of employees 7

% women in workforce 29%

No. of prosecutions 0

No. of workplace incidents

0

Community spending 0

Size of the Board 4

No. of independent Directors

0

Board duration (years):

Rob Richards (CEO) <1 year

Lord Willets (Chairman) 2 years

George Katzaros (NED) 3 years

Gavin Mayhew (NED) 1.5 years

Corporate Governance Code adopted

QCA

Political donations 0

1.4

1.2

1.8

0.9

1.7

0 1 2 3 4 5

Environment

Leadership &Governance

Bus. model &Innovation

Social Capital

Human Capital

SEAL ESG Scorecard: Avg Risk

Low High

4


ESG Scorecard

Risk = potential or actual ESG risk level. Range 0 to 5; 0 = low/no risk, 5 = high risk

Execution = what is being done to address the potential or actual risk. Range 5 to 0; 5 = being managed well, 0 = not being addressed


ESG Score Risk Execution Comment

Environment

GHG emissions 2 2 Too early for data to be meaningful

Air Quality 1 2 Minor concerns over air-freight of sub-assemblies

Energy management 3 5 Plant is 100% powered by renewable electricity

Water and waste management 0 0 Not applicable

Ecological impact 1 4 No impact other than PV cells on factory roof

Leadership & Governance

Business ethics 0 0 Too early for data to be meaningful

Competitive behaviour 0 0 Too early for data to be meaningful

Management of legal & regulatory issues 2 3 Product certification progressing well

Critical incident risk management 2 2 Plans in place but yet to be tested

Systemic risk management 2 3 Limited risk. Additional non-Exec would help

Business model and innovation

Product design & lifecycle management 3 3 Flexible PV cells expand market greatly.

Business model resilience 3 4 Will outsource/license if favourable

Supply chain management 1 3 Inputs sourced from multiple suppliers

Materials sourcing & efficiency 2 3 Limited data but low impact

Physical impacts of climate change 0 3 Not an issue

Social Capital

Human rights and community relations 1 2 low risk but early stages of policy formation/ disclosure

Customer privacy 1 2 low risk but early stages of policy formation/ disclosure

Data security 1 2 low risk but early stages of policy formation/ disclosure

Access and affordability 0 0 Not applicable

Product quality and safety 1 3 limited history and fast changing technology

Customer welfare 1 3 Aim is to be completely B2B, via wholesale distributors

Selling practices & product labelling 1 3 Aim is to be completely B2B, via wholesale distributors

Human Capital

Labour practices 1 2 limited evidence of policies

Employee health & safety 1 2 limited evidence of policies

Employee engagement, diversity & inclusion 3 2 limited diversity, including Board level

5


Verditek and the solar industry

❖ A key part of the energy source of the future

The Paris Agreement on climate change (2016) aims to keep a global temperature rise

this century to “well below 2 degrees Celsius”, and to pursue efforts to limit the

temperature increase even further to 1.5 degrees Celsius (Article 2). As part of the

accord, each sovereign signatory is obliged to prepare, communicate and maintain a

Nationally Determined Contribution (NDC) and to pursue domestic measures to achieve it

(Article 4). It is estimated that for the core objective of the Paris Agreement to be

achieved, a 70% reduction in carbon emissions would be required. This means emissions

need to be reduced from the current projection of 33GT per year in 2050E to 9.8GT pa.

These aims can only be achieved by a wholesale adoption of the use of alternative energy

sources such as solar and wind in place of carbon emitting fossil fuels such as oil and coal.

To highlight this point, a study undertaken by the International Renewable Energy Agency

(IRENA/REmap Case) finds that in order to ensure that the key targets of the Paris Climate

Change Accord are achieved, renewables would need to form 86% of the power

generation mix by 2050. This would require the share of electricity in final energy

consumption rising from around 20% today to circa 50% over the same period. While

wind is forecast to be the largest source of renewable power (set to supply more than

one-third of total electricity demand), Solar is set to be the second most significant source

of clean energy, supplying more than 25% of total electricity demand by 2050. For this to

be achieved there needs to be a substantial increase in installed solar capacity.

As can be seen from the below, under IRENA’s ‘REmap’ scenario, solar PV installed

capacity would increase from the 2018 level of 480GW to more than 8,500 GW by 2050.

This represents a 9% compound annual growth rate (CAGR) between 2019-2050.

Moreover, under this scenario, electricity generation from solar would supply 25% of

total electricity demand by 2050E, representing a more than twelve-fold increase in

penetration from 2018 and a 125-fold increase relative to 2010.

Deployment of solar on this scale would reduce carbon emissions by an estimated 4.9 Gt,

corresponding to c.21% of the total envisaged carbon emissions reduction.


Adoption of alternative energy sources such as solar is the only way of achieving aims of the

Paris Agreement

Solar PV installations forecast to increase from 480GW to 8,500GW by

2050

Significant increase in solar power generation

forecast by 2050

Renewables need to be c.86% of the power

generation mix by 2050

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2010 2018 2030E 2050E

Gig

awat

ts

Solar PV installed capacity & share of total electricity demand

Installed capacity (GW) - lhs

Generation as % of total demand - rhs

Source: IRENA, 2019

6

https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement

https://www.irena.org/publications/2019/Apr/Global-energy-transformation-A-roadmap-to-2050-2019Edition


❖ The solar market – three main areas

The Solar market can be broken down into 3 main segments. These being:

• Residential

• Commercial

• Utility

Residential refers to solar PV installations mounted on the rooftops of private dwellings in

order to supply the electricity requirements of an individual house, with excess electricity

being sold back to the grid.

Commercial represents solar PV installations on the rooftops of offices and factories, as

well as ground-mounted PV panels located on land zoned for industrial and commercial

use.

Utility, or utility-scale solar, comprises very large arrays of ground-mounted solar PV

panels which supply electricity to a utility according to the terms of a Power Purchase

Agreement (PPA). It is the existence of a PPA rather than a particular generation capacity

which defines the boundary between utility-scale and commercial, though most

commentators agree that utility-scale refers to installations with a capacity of greater

than 10MW.

Of the three market segments, utility is the largest, accounting for c.66% of the

cumulative solar PV installations globally. Utility has also been the fastest growing market

segment, having grown at a CAGR of around 78% 2005-2019. However, in the near term,

residential is expected to show the fastest growth, with an 18.4% CAGR in installations

forecast over the next 3 years.

Verditek does not compete in the utility-scale solar market, which tends to be dominated

by large cap solar companies with massive manufacturing footprints and corresponding

scale economies. However, it does compete in both the residential and commercial

markets, with its technology offering a niche solution for use in installations where

conventional solar PV panels are not suitable due to load-bearing restrictions and/or a

where a higher level of durability is required.


Three main areas of solar market defined as residential, commercial

and utility

Residential expected to see fastest growth in

near term

Verditek competes in the niche areas of commercial

and residential

Utility-scale solar largest source of generation

Residential, 14%

Commercial, 20%

Utility, 66%

Cumulative PV Solar Installations by Type (2019A)

Source: Bloomberg, SEAL estimates

7


In the residential market, Verditek announced in January 2020 that it was trialling an

integrated solar tiles solution with a top-tier roofing company with the aim of

incorporating these into housing projects.

In the commercial market, Verditek targets a range of commercial real estate such as

warehouses and industrial structures. The commercial opportunity is large, with an

estimated 250k hectares of south-facing roof space in the UK alone. It is interesting to

note that in Germany, PV mounted on commercial rooftops accounts for around 50% of

total installed solar PV capacity, whereas in the UK only around 30% of installed capacity

is from such installations. This suggests it is something of an underexploited opportunity

in the UK and commercial as a whole should see double digit growth in the foreseeable

future.

Within Commercial, Verditek is targeting niches where the products offered by larger

competitors are not suitable for weight reasons, for example the roofs of certain types of

distribution centres which tend to be low-load bearing. Verditek makes a point of not

going head-to-head with the large global competitors on conventional panel projects,

with the significant manufacturing scale advantages of the latter meaning that Verditek

cannot match their prices. Another example within Commercial where Verditek’s

products provide a solution that cannot be addressed by conventional PV panels is the

roofs of petrol stations, where panels can be used to run the ancillary power

requirement.

In addition to the traditional commercial market, Verditek is also targeting the niche (and

fast growing) segment of modular construction, whose low-load bearing roofs constitute

a natural market for Verditek’s technology. Modular construction PV technology is often

designed-in, with a large part of the selling point of such structures being the eco-friendly,

low carbon footprint. The benefit of such structures being partly run on solar energy can

only augment their green credentials.

Inroads into this market will necessitate agreements with modular construction OEMs,

with the aim of getting a Verditek solution designed into the final product. A

development in this area is Verditek’s recent agreement with Green Unit to incorporate

Verditek solar PV technology into the curved roofs of their modular ‘ARC’ buildings.


Verditek is trialling a solar tile solution for

residential

Verditek focuses on solutions where a light

weight product is needed

Initial progress in the modular construction

market

2.812.6

45.5

105.7

1.1

15.6

52.9

140.1

2005 2010 2015 2020E

Cummulative PV solar installations (GW)

Residential Commercial

Source: Bloomberg, SEAL estimates

Scribble Sheet:

Residential and modular buildings

UK annual completions of new build

houses = 190k

% of newbuild which are houses

with own roof space = 80%

% of houses suitable for solar tiles

(i.e. premium houses) = 15%

Total number of suitable houses =

190k x 80% x 15% = 22,800

Gen. capacity per house = c.6KW

UK resi annual demand = 137MW

EU modular building per year = 60k

Gen capacity per house = 6kw

EU modular annual demand = 361MW

Sources: SEAL Advisors, Roland Berger

8

https://www.greenunit.co.uk/


❖ The off-grid solar niche: a large near-term opportunity

While the commercial and residential solar markets provide a good backdrop for the

longer term growth prospects for Verditek, it is in the niche market of off-grid solar which

would seem to offer the greatest near-term opportunity. Off-grid solar is typically used

where there is no electric grid, or where the cost of connecting to the grid is too high to

be economically viable. Examples might include small-scale projects in rural areas of

developing countries, or alternatively base camps for extractive industries such as mining

and oil & gas which are areas showing strong growth.

The extractive industries niche of the off-grid solar market is of particular interest to

Verditek given the potential applications of its solar PV technology to the challenges faced

by companies operating in remote environments. In such locations the conventional

solution of installing a diesel generator can result in a price of power that is 3 times higher

being connected to the grid (e.g. USD300/MWh vs USD100 MWh). Verditek does not aim

to entirely displace conventional liquid solutions, but instead work in tandem with them

to lower the overall cost of power with the Verditek solution providing power during

daylight hours. An additional benefit is that diesel generators can be unreliable, so

installing Verditek solar panels also improves the overall reliability of power supply.

Verditek received its first order in June 2020, an order from oil & gas EPC company SAF

for solar modules for an off-grid application at an oil infrastructure installation camp in

Pakistan. Here, Verditek panels were installed on the roofs of the prefabricated office

containers, providing power for the interiors (air con etc.) during daylight hours. Two

months after the installation went live, Verditek was awarded a much larger follow-on

contract by the same company for six PV modules with a combined output of 1.5MW,

worth USD2.2m. Verditek followed up its success with SAF with an order from Italian oil &

gas EPC company Endeco for deployment in Oil & Gas maintenance camps in Libya.

The oil & gas segment of the off-grid market offers a significant opportunity for Verditek’s

solar products. Since each onshore drill-rig consumes on average 2MW of power for its

ancillary power requirement, this could represent a +800MW pa opportunity. Since these

drill rigs have to be moved every 4-6 weeks to ensure constant production rates, installing

conventional PV panels is not suitable since they often get damaged when the rigs are


The off-grid market is a key market for Verditek

Micro-grid market has been growing at 28%

CAGR since 2008

First orders received in the oil & gas sector for off-grid

power

Verditek’s product designed to work in-tandem with existing

power generation

0.3 0.3 0.40.5

0.70.9

1.2

1.5

2.0

2.6

2.9

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Micro-grid solar capacity (GW pa)

28% CAGR

Source: IRENA, 2019/SEAL

9


Moved. Verditek’s polymer-based solar module offers a natural solution to this problem,

being light weight and durable. Additionally, the offshore industry represents a significant

opportunity. Energy usage in offshore drilling rigs can be split into that required for the

actual hydrocarbon extraction process (e.g. driving pumps for extraction of oil & gas

/reinjection of water) and ancillary uses (eg. heat and light for living quarters). A study

carried out using the example of an FPSO (‘Floating Production Storage and Off-Loading’

vessel) located offshore Angola replacing diesel generators for powering the laundry

systems in the living quarters with solar PV found a cost saving of c.39% based on a 20-

year operations period. (Source: ‘Solar Power for Sustainable Offshore Petroleum

Exploration and Production in Africa’ by Tawiah, S., Marfo S.A. and Benah, D. Jnr., 2017).

The Mining sector faces the same challenges with regard to off-grid power – and hence

offers the same opportunities for a novel PV solar solution. Verditek has made initial in-

roads into this market, announcing in July 2020 that it had been awarded its first contract

in the mining vertical, with Black Tulip Minerals placing an order for EUR0.2m worth of

solar PV modules. This will be used as part of a diesel-hybrid system at a mining camp in

Los Lomas, Peru. The combination of PV panels with diesel generators is set to

significantly lower fuel consumption. In September 2020, they announced their first

order in the Australian mining sector with a contract to supply 75kW of lightweight solar

PV as part of a diesel-hybrid solution at InterGroup’s gold mining exploration operations

in Queensland. Commentary from the company suggests that the order size could

ultimately be scaled up to 1.5-2MW.

Other areas of the off-grid segment that are suited to Verditek’s solar technology include;

Telecom towers, Agriculture and Defence.

Within the telecommunications market, Verditek estimates that there are thousands of

towers sited in remote locations which are currently running off expensive diesel

generators. Usage of Verditek technology would both reduce operating costs, as well as

the asset owner’s carbon footprint. In January 2020, Verditek announced it was trialling

its modules with a large global equipment supplier in order to try to tap into this

opportunity. In the agri-sector, Verditek announced in July 2020 a contract win for solar

PV panels for installation on the roofs of agricultural structures located at some distance

from a grid connection. In Defence the company announced in September 2019 it was

targeting a military application for its solar technology, which we understand to be for use

in forward base camps.


Oil & gas sector presents significant opportunities

for Verditek’s solar products

Other off-grid markets include telco towers,

agriculture and defence

Mining also a key sector for the off-grid solar

market

Scribble sheet: quick analysis of the off-grid market potential

Oil & Gas Mining Telecom towers

Number of operational rigs = 2000

Power needed per rig (all day)= 2MW

Addressable % of rigs p.a. = 20%

Addressable MW per rig = 0.4

Total addressable market p.a. =

800MW

Active Exploration camps = 2300

Power need per camp = 4MW

Addressable % of camps per year =

20%

Addressable MW per camp = 0.8

Total addressable market p.a =

1840MW

Number of off-grid Telecoms towers =

390k

Power needed per tower = 1KWH per

day

Per tower = 0.37MW p.a.

Total MW = 71.2MW pa

Addressable % of towers pa. = 5%

Toral addressable market p.a. =

3,589MW

Sources: SEAL Advisors, Baker Hughes, Roland Berger, GSMA, Bloomberg, Statista

10

https://www.igmining.com/


❖ Transportation: large market, disruptive technology

Solar PV technology is increasingly being utilised for niche applications in various areas of

the transportation sector. In this sector Verditek has so far announced three

development programs in which their product is being trialled:

• a 3 month trial with a UK based light commercial EV OEM using Verditek’s lightweight

solar PV panels on its single platform eCargo model to extend battery range

• a paid trial with the Dutch engineering company IM Efficiency to incorporate Verditek

solar PV technology on conventional trucks as a retrofit solution in order to reduce

total emissions and improve fuel consumption

• A distribution agreement with Softmetal to prove and sell a solar PV solution for

perishable goods vehicles, such as refrigerated trucks for the food distribution industry

Along with the continued growth in EVs comes the requirement for a large-scale build-out

of EV charging infrastructure. It is estimated that of the 7.3m chargers in operation

worldwide, around 6.5m (or c.89%) are light-duty vehicle slow chargers. As EV

penetration increases, there will need to be a corresponding build out of fast chargers

available for use in public spaces, notably parking infrastructure .

Verditek’s lightweight solar PV products could constitute a key component in innovative

easy to install charging solutions for electric cars, buses and trucks. The aim here would

be to partner with manufacturers of EV carport charging canopies to supply the PV panel

which provides the electricity source for the charger. Such a charging solution could, be

offered to owners and operators of parking facilities as a supplemental revenue stream.

There are 60m off-street parking bays in Europe, and each bay would require an

estimated 2KW in terms of generation capacity, which highlights the size of the potential

addressable market for EV charging facilities.

The other area of the broader Transportation vertical where Verditek has seen some

initial success is Marine. In July, Verditek secured a retrofit contract with a Thailand-

based company (Octopus Marine) to provide its technology to power cabin electrical

loads (such as navigation, lighting and comms equipment). This follows on from an earlier

order win in Australia. The company estimates that the market opportunity here could be

equivalent to 150-250 MWs pa.


Verditek is active in various parts of the

transportation sector

EV charging infrastructure could be a

very large market

Initial success in the marine sector

Scribble Sheet:

EV charging infrastructure –

carports

Total number of car parking bays in

EU = 60m

Power needed per bay to charge an

EV = 2KW

Total potential MW (p.a) with

100% conversion = 120GW

Addressable % of bays p.a. = 2.5%

Total addressable market p.a. =

3,000MW

Sources: SEAL Advisors

0.017 7.2

140

245

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

50

100

150

200

250

300

2010 2019 2030E(1) 2030E(2)

Forecast growth of global electric vehicle (EV) ownership

EV Stock (m) - LHS

Penetration (%) - RHS

Source: IEA Global Vehicle outlook, 2020

2030E(1) = stated policies scenario2020E(2) = sustainable development scenario

11


❖ Competitive landscape

In terms of competition, the solar PV sector can be split into the following main groups:

1. Polysilicon Manufacturers – includes; Daqo (China), GCL-Poly (China), OCI (South

Korea), Wacker Chemie (Germany) and Xinte (China)

2. Wafer Manufacturers - includes; JA Solar (China), Longi Green Energy (China), Shin-

Etsu (Japan), and Siltronic (Germany)

3. Solar Cell Manufacturers - includes; Canadian Solar (Canada), JA Solar (China), Jinko

Solar (China), Longi Green Energy (China), Motech (Taiwan), Q Cells (South Korea),

Tongwei (China), Trina Solar (China), UREC (Taiwan)

4. Solar Modules – includes; ; Canadian Solar (Canada), JA Solar (China), Jinko Solar

(China), Longi Green Energy (China), Q Cells (South Korea), SunPower (US), Soltech

(Sweden), Trina Solar (China), UREC (Taiwan) and Vivint Solar (US)

As can be seen from the examples given, there is a tendency towards vertical integration

within the broader PV manufacturing space, with wafer manufacturers also involved in

solar cells and modules, and - more commonly - solar cells and solar modules being

manufactured by the same company.

Verditek is only active in solar modules manufacturing, using cells sourced from OEMs

located in Taiwan. The Verditek production process is ‘cell-agnostic’, which means that

they are not tied to any one particular design of cell, meaning that they can build in

improvements in cell technology as they occur by switching to the newest generation of

cells. A key virtue of the market niches targeted by Verditek is the fact that not only are

their requirements unsuited to the heavier conventional panels produced by the global

solar OEMs, but the average order sizes are also typically much lower. This lowers the risk

that Verditek finds itself competing against companies that are able to significantly

undercut it on price as a result of manufacturing scale advantages. Verditek’s main direct

competitors in the module segment include some of the smaller Chinese manufacturers

(such as SunMan with its lightweight ‘eArche’ panel) and small European manufacturers

such as Solbian and Soltech.


Tendency to vertical integration within the

solar industry

Verditek only operates in the solar module sector

Competitive landscape in the solar manufacturing sector

Polysilicon Wafer Solar Cell Solar Module

Daqo JA Solar

GCL-Poly Longi Green Energy

OCI Shin-Etsu Canadian Solar

Wacker Chemie Siltronic Jinko Solar

Xinte Motech

Q Cells

Trina Solar

UREC

Soltech

SunPower

Vivint Solar

Source: SEAL Advisors

Verditek not subject to the pricing pressure of the

large OEMs

Sector dominated by Asia-based companies

12


❖ Long-run revenue scenario for Verditek Solar

In constructing a long-run revenue scenario analysis for Verditek, the key factors to consider are possible demand for the company’s

products as well as its ability to supply that demand from available manufacturing capacity. Currently, Verditek has two production lines

operating at its manufacturing facility in Lainate, near Milan. These lines have a combined effective name plate capacity of 60 MW pa

(allowing for recent productivity advances in panel technology plus assuming triple-shift working). Assuming a max peak utilisation rate in

the high 80%s would equate to an effective max capacity of c.52 MW pa. This gives the unit volume part of the revenue equation based

on the current manufacturing footprint. In terms of the price component, the company estimates that the (current) selling price is in a

range of EUR1.0-1.5m/MW, depending on the customer and application.

Orders signed to date represent around 2.5MW, equivalent to only c.4% utilisation of effective capacity, the company therefore has

ample spare capacity (at present) to capitalise on the large TAMs that it is targeting. The long-term scenario assumes that further

contracts are won across the various verticals such that maximum effective capacity in the Lainate facility is reached in Year 4 (run-rate).

However, prior to this, the scenario assumes that the company opens an additional manufacturing facility to meet future demand, most

likely slightly larger than its current facility (perhaps c.100 MW nameplate capacity) and possibly located in Asia which would put it closer

to end customers as well as introduce geographical diversity into the manufacturing footprint (likely capex bill c.£5m). The revenue

scenario depicted below assumes this new plant goes operational in year 4 (which accounts for the drop in the overall utilisation rate

shown in that year). Price per MW is assumed to deflate at 7% pa.

Verditek’s implied market share on a SAM basis in the final year of the above model would be c.3%.

Clearly, the long-term revenue scenario outlined in the table above is highly dependent on a number of key assumptions, notably the rate

at which Verditek is able to win new orders to deliver the increases in capacity utilisation rate, production and sales. Additionally the

investment in a second plant is of contingent on the company filling existing capacity at the rate shown in the table. As such, the above

should not be taken as a forecast, but rather a long-term revenue scenario that depicts what could transpire under a certain set of

assumptions. The actual outturn may differ markedly from that detailed in the scenario described here.


Scenario analysis Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Name-plate Capacity (MW) 60 60 60 160 160 160 160

Capacity utilisation rate (%) 5.0% 25.0% 65.0% 38.9% 51.4% 67.0% 79.5%

Volume sold (MW) 3 15 39 62 82 107 127

Price/MW (Eur) 1.23 1.14 1.06 0.99 0.92 0.86 0.80

GBE/EUR exchange rate 1.10 1.10 1.10 1.10 1.10 1.10 1.10

Price/MW (£m) 1.12 1.04 0.97 0.90 0.84 0.78 0.72

Revenue (£m) 3 16 38 56 69 83 92

Utilisation assumptions Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Current facility (Lainate):

Name-plate Capacity (MW) 60 60 60 60 60 60 60

Volume sold (MW) 3 15 39 52 52 52 52

Capacity utilisation rate (%) 5% 25% 65% 87% 87% 87% 87%

New facility:

Name-plate Capacity (MW) n/a n/a n/a 100 100 100 100

Volume sold (MW) n/a n/a n/a 10 30 55 75

Capacity utilisation rate (%) n/a n/a n/a 10% 30% 55% 75%

13


Sources of optionality

❖ Graphene-integrated solar PV cells

The long-run revenue scenario we have outlined for solar does not include any impact

from Verditek’s JDP with Paragraf and the commercialisation of its graphene-integrated

solar cell (GIPV). Currently the technology is not proven from a commercial mass-market

perspective, but also the business model for a GIPV would differ from the in-house

manufacturing model adopted by Verditek for its lightweight solar PV products. Were the

JDP to result in a commercially successful solar cell, Verditek would likely seek to licence

out the technology, rather than produce the cells in-house. The royalty route being the

most effective means of targeting the potentially very large TAM available for GIPV solar

cells. In the event that this product can be effectively commercialised and produced on a

mass-market basis, the implications for Verditek could be substantial.

The likely customers/potential royalty partners for the Paragraf-Verditek GIPV would be

the global Consumer Electronics OEMs, particularly those operating in the broad area of

mobile internet-enabled devices (handsets/tablets/OEMs). Here the value added of the

graphene-based product would be to meaningfully extend battery life without adding

significant weight to the device. With annual smartphone sales of c.1.5bn units globally,

tablet sales of c.150m units pa and a similar number of laptops sold every year, the TAM

could be potentially very large. In this respect, comparatively small penetration rates

could have a meaningful impact on company revenues.

❖ Carbon-capture and bio-filtration

In addition to its investments in solar, Verditek currently has two further sources of

optionality within the clean-tech sector. These are a 23.6% equity stake in ICSI , which

owns a novel patented absorption technology that optimises mass transfer of gas and

liquid with applications in industrial emissions control and carbon capture; and its 51%

stake in BBR Filtration, which owns a patented bio-filtration de-odourisation technology

with applications in the utilities and industrial sectors.

While the technology looks extremely interesting, particularly the carbon capture

technology, neither ICSI or BBR Filtration have yet to achieve sales. However, the

addressable markets for both are large. For IC Solutions, the sour gas market alone

(treatment of natural gas to meet sales gas requirements) is worth c.USD55bn pa, and to

this should be added the opportunity in carbon capture, with the global carbon capture

and sequestration market size estimated at c.USD5bn pa (2017A) and growing at c.15%

CAGR (source: ResearchandMarkets). For BBR, annual capex spend on abatement

technology is c.£450-600m pa. If IC Solutions or BBR are successful in even targeting a

small proportion of their respective end markets, this could have significant implications

for the value of Verditek’s equity stakes in these companies. As such, this represents a

further source of optionality for Verditek.

In summary

Verditek is a unique company listed on the London stock exchange. It offers a direct

exposure to the fast growing solar module market with a particular focus on off-grid

applications. It has recently moved from the development and production phase to one

of commercialisation. Its production facility is fully operational and its addressable

markets are very large. Delivery and execution of orders is now the key to its success.


Revenue scenario for solar does not include any contribution from

graphene

Potential market for graphene-based solar PV

cells is substantial

Other sources of optionality include bio-

filtration and carbon capture

Carbon capture market is very large and growing by

over 15% per year

14

https://www.paragraf.com/

https://www.icsolutions.work/



A short history of solar power

1839 Edmond Becquerel discovers the photovoltaic effect

1883 US inventor Charles Fritts builds world's first solar cell

1884 World's first rooftop solar panel is installed in New York

1905 Einstein publishes a paper on the photoelectric effect

1941 First silicon monocrystalline cell is created

1954 Bell Labs create world's first commercial silicon solar cell

1958 Solar energy helps power NASA's Vanguard 1 satellite

1960 Hoffman Electric achieves 14% efficiency in PV cells

1963 Mass production of solar PV cells begins

1976 First amorphous silicon PV cells developed

1977 Average price of solar cell is c.USD77/Watt

1982 First solar power station >1MW is built in California

1985 Uni of Nw Sth Wales achieves 20% efficiency for silicon cells

1986 ARCO manufactures first thin-film solar panel

1992 Uni. of Sth Florida develops a 15.9% efficient thin-film cell

2012 World's cumulative PV electricity capacity > 100GW

2014 Ivanpah, solar power generation plant goes online

2015 Sun Power achieves 22.8% efficiency

2016 First solar-powered plane flight around the world

2018 Oxford PV perovskite solar cell achieves 28% efficiency

2019 Global installed solar capacity 580GW

2020 Average price of solar cell is c.USD0.80/Watt

❖ Solar market: The Outlook (IRENA 2019)

4621

1210

587323

2010 2018 2030E 2050E

Total installation cost of solar (USD/kw)

0.37

0.0850.05

0.03

2010 2018 2030E 2050E

Levellised cost of solar electricity (USD/kWh)

698925

1,17516.9

178

540

0.8

40.3

481.0

2 000 2 010 2 018

Electricity capacity (GW) by renewable source

Hydro

Wind (OS)

Solar PV

2,6233,439

4,14930.8

335

550

0.8

32

550

2 000 2 010 2 018

Electricity generation ('000 GWh) by renewable source

Hydro

Wind (OS)

Solar PV

Wind, 33%

Solar PV, 47%

Hydro, 10%

Fossil, 9%

Other, 10%

Forecast installed power capacity by 2050

Wind27%

Energy Efficiency

24%

Solar PV21%

Other16%

Renewables12%

Target contribution to CO2 Emissions Reduction by 2050

291 437

1860

891

1728

4837

Europe N America Asia

Forecast installed capacity by region (GW)

2030E 2050E

21% 23% 25%30%

33%

EU China Global Japan US

Forecast solar PV share in total electricty generation by 2050

15


Financial Summary (reported)

Balance sheet


First revenues expected in H2 2020

Summary Income statement

End December (£m) 2017(FY) 2018 (FY) 2019 (FY) 2020 (H1)

Revenue(m) 0.00 0.00 0.00 0.00

EBITDA -1.81 -1.91 -1.59 -0.80

EBIT (m) -1.81 -1.92 -1.66 -0.84

PBT (m) -1.98 -2.66 -1.86 -0.92

EPS (p) – fully diluted -0.01 -0.01 -0.01 -0.00

DPS (p) 0.00 0.00 0.00 0.00

Summary Balance sheet

End December (£) 2017(FY) 2018 (FY) 2019 (FY) 2020 (H1)

Non-current assets 1.03 0.52 0.91 0.93

Current assets 1.90 1.12 0.58 1.12

Cash 1.19 0.68 0.11 0.59

Total Assets 2.93 1.64 1.49 2.05

Current liabilities 0.40 0.58 1.67 1.51

Long term liabilities 0.00 1.17 0.19 0.18

Total liabilities 0.40 1.75 1.85 1.68

Total interest bearing debt 0.11 1.21 0.67 0.70

Net Assets 2.53 -0.11 -0.37 0.36

Summary Cashflow statement

End December (£) 2017(FY) 2018 (FY) 2019 (FY) 2020 (H1)

Operating cashflow -1.61 -1.71 -1.32 -0.94

Interest -0.01 0.00 0.00 0.00

Tax 0.00 0.00 0.00 0.00

Capex (gross) -0.08 -0.14 -0.16 -0.00

Acquisitions (net) -0.74 0.00 0.00 0.00

Dividends 0.00 0.00 0.00 0.00

Other 3.61 1.33 0.91 1.42

Net cash flow 1.17 -0.52 -0.58 0.48

Opening net debt/cash -1.09 0.53 0.56 0.11

Cash of £0.59m at H1 2020. £0.3m

received post period end

Total interest bearing debt includes £0.17k of convertible loans

Manufacturing site in Italy now fully

invested

Net debt of £0.11m at H1 2020

H1 2020 figures are unaudited

16


Listed peer group (international) *12/10/2020

Contacts

Investor RelationsVerditek [email protected]: +44 (0) 20 7129 1110

Nomad & BrokerWH IrelandTel: +44 (0) 20 7220 1666

AuditorsCrowe Tel: +44 (0) 20 7842 7100

SEAL [email protected]

Company Country (HQ) Ticker Market Cap*

Canadian Solar Canada CSIQ USD2.2bn

First Solar US FSLR USD8.4bn

Jinko Solar China JKS USD2.6bn

Soltech Sweden SOLT SEK1.4bn

SunPower Corp US SPWR USD2.8bn

SunRun US RUN USD12.5bn

Vivint Solar US VSLR USD5.4bn

Verditek UK VDTK GBP33m


Key Events

Date Event

Aug-17 IPO/Admission to AIM, raised £2.75m

Aug-17 Trial contract with Media One to power outdoor billboards

Apr-18 Lord Willets appointed as Non-Executive Chairman

June-18 Successful First Stage CO2 Capture Test for WES

Oct-18 Stake in WES transfers to stake in ICSI

May -19 Verditek takes complete control of Greenflex Energy

May-19 Official opening of PV module factory in Lainate Italy.

Jun-19 JDP announced with Paragraffor graphene integrated PV to produce world’s first GIPV

July-19 Passes IEC Certification of solar PV Technology

May-20 Rob Richards appointed as CEO

June-20 First order in the oil & gas sector

Jul-20 First commercial order in the mining sector

Aug-20 Significant follow-on order from SAF

Sept-20 First commercial order in the Australian mining sector

Board of Directors

Lord David WillettsChairman

Member of Parliament for Havant (1992-2015), Minister for Universities and Science (2010-2014). Lord Willetts is a visiting Professor at King’s College London, Governor of the Ditchley Foundation, Chair of the British Science Association and a member of the Council of the Institute for Fiscal Studies.

Rob RichardsChief Executive Officer

Experienced Asia Pacific COO / Executive Director / Regional Director within the oil & energy sector. Skilled in delivering large EPC projects and running multi-discipline projects. Bachelor of Engineering (BEng) (Hons) in Electrical Power Engineering from Heriot-Watt University and a Chartered Engineer.

George KatzarosNon-Executive Director

George is the founder of Verditek plc. George has over 30 years’ experience in advisory and asset management as well as investment banking and venture capital particularly for cleantech companies. George is a co-founder of Zerowatt Homes International Limited, a modular construction company.

Gavin MayhewNon-Executive Director

Gavin was formerly the CEO of Energy Savers FZE, a UAE consultancy providing energy saving solutions to commercial and industrial clients. Before that Gavin was president of Zubair Terminal Company in Iraq, which was setup to finance, develop and operate a new commercial port in Iraq.

17

Verditek – the future of solar

Glossary of terms used in this report

CAGR Compound annual growth rate

GIPV Graphene-integrated photovoltaic cell

GW Gigawatt of power

JDP Joint development program

KW Kilowatt of power

MW Megawatt of power

Nameplate capacity The full-load sustained output of a facility (e.g. solar module production facility)

OEM Original equipment manufacturer

PV Photovoltaics - the conversion of sunlight into electricity using semiconducting materials that exhibit the photovoltaic effect

SAM Serviceable addressable market

TAM Total addressable market

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Documents

13/10/2020 VDTK 10.75p £33m